THE GLOBAL CRISES AND THEIR IMPACT- The Future of Welfare State

1. THE GLOBAL CRISES AND THEIR IMPACT- The Future of Welfare State Juho Saari Professor University of Kuopio, Finland juho.saari@uku.fi (c) Juho Saari 2009

2. I. DIFFICULT TIMES • The global recession is becoming more likely regardless of stimulus packages. • It will last at least three to four years, and will result in major adjustment in employment and industries. • Massive social costs of creative destruction and economic transformation . • But the majority of individuals and companies will probably survive intact - the winners will be better-off. • A few good news in the field of social development. (c) Juho Saari 2009

3. 2. THE CHALLENGES OF PUBLIC ECONOMIES • Excessive public deficits in most advanced societies/economies - but not everywhere, indicating major shifts in a global system; • Public economies in additional heavy debts for 10-20 years. • The crowding out of social expenditure and ODA of public expenditure in many growth-oriented economies/societies. • Fiscal stimulus, national innovation systems, growth and employment policies, education • Tax cuts? (we are all Keynesians now) • The collapse or cut-throat competition of the charities. (c) Juho Saari 2009

4. 3. THIS CAN BE A WINDOW OF OPPORTUNITY • The recession also means opportunities. Q: who shall be able to exploit this opportunity socio-politically? • How to protect ODA and social expenditure? • At least temporarily changing the balance of power in capitals and the BW institutions between different policy proposals. • The state will invervene and regulate financial markets and some industrial sectors more efficiently, and will become a major shareholder in many industries. • Historical evidence indicates that the rapid world systems, socio-economic and institututional transformations stimulate new thinking in social development. (c) Juho Saari 2009

5. 4. A CASE OF FINLAND:A successful adjustment of comprehensive social policy is possible. (c) Juho Saari 2009

6. 5. REINVENTING THE WHEEL I - A policy paradigm for social development • A semi-new paradigm in development thinking on the institutional design of the markets and public policies: focus on adaptive efficiency. • In advanced economies (at least) national models with policy complementaries are quite path-dependent structures - one size/policy package does not fit for all. • Something to learn?: Scandinavian models are (still) effective in combining competitiveness, sustainable development, employment, and social cohesion. (c) Juho Saari 2009

7. 6. REINVENTING THE WHEEL II - Agenda setting for social development • POLICY COORDINATION: Flexicurity - labour relations, active labour market, life-long learning, social policy • LONG TERM-THINKING: Life cycle approach revisited - distribution over a life cycle with a stronger redistibution towards families with children. • UNCERTAINTY - families, labour markets, housing, and indebtedness. • PROPERTY RIGHTS : Asset based social policies - New sources of resources to households. • SUBJECTIVE WELL-BEING: Focus on relative differences and competition. (c) Juho Saari 2009

8. 7. REINVENTING THE WHEEL III - Framing new policies • It matters how people and organisations interpret new policies. • How policies are frames is crucial for positive feedback and trust. • Common policies need coherent messages from the ministries of social affairs to the ministries of finance, and in-between the regional and global institutions. • Strong connections to sustainable development policies. (c) Juho Saari 2009

9. As an example, how to promote subjective well-being • More positive expectations to limit the impact of adaptive preferences. • Smaller social differences to limit the rat race. • More legitimacy of social policy institutions to allow flexibility. • More trust towards the government to make reform-making possible. • More voluntary work to support social connections. (c) Juho Saari 2009

10. THANK YOU (c) Juho Saari 2009